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STRATEGIC CHANGE AND TRANSFORMATION: A CASE STUDY AT

MALAYAN BANKING BERHAD (MAYBANK)

HARTINI AHMAD

SHAHIMI MOHTAR

DARWINA AHMAD ARSHAD

AZRAIN NASYRAH MUSTAPA

UNIVERSITI UTARA MALAYSIA

2012

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ACKNOWLEDGEMENT

A special thank you goes to Malayan Banking Berhad (Maybank) for their assistance and

support rendered on this case study project. Their co-operation is needed much appreciated.

We are grateful to Consulting Business Intelligent-Centre (COBC-BI), College of Business

which first initiated this case study project in 2010.

An acknowledgement is also given to our Doctor of Business Administration (DBA) students

who gave value-added input to the project. We are also grateful to the Research and

Innovation Management Centre, the Institute of Management and Business Research, the

Centre for University-Industry Collaboration and the College of Business.

An appreciation goes to others who also contributed in many ways, directly or indirectly to

the completion of the project.

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ABSTRAK

Pada masa kini cabaran yang dihadapi oleh industri perbankan sangat besar kerana

kebanyakan bank wujud dalam tempoh masa berdominasikan pengurangan-kos, pengecilan

saiz atau pengecilan skala. Kajian kes ini bertujuan menganalisis faktor-faktor luaran dan

dalaman Maybank Berhad dengan melihat strategik pemasaran produk dan perkhidmatan

serta program transformasi yang telah berlaku di syarikat tersebut. Sejajar dengan teras

strategik “Perkhidmatan Kewangan Komuniti dan Perbankan Secara Global”, beberapa

strategi transformasi berjaya dilaksanakan iaitu Insurans & Takaful, Program Transformasi

Teknologi Maklumat dan Kualiti Perkhidmatan. Tiga strategi ini berkait rapat dengan staf

dan pelanggan Maybank. Adalah sangat penting bagi sesebuah syarikat memahami jangkaan

pelanggan serta persepsi kualiti yang diberikan. Ini kerana tahap kepuasan yang diterima

oleh pelanggan merupakan kunci utama mengekalkan kesetiaan pelanggan di samping

menonjolkan imej industri perbankan sebagai industri terbaik di dunia dalam persekitaran

yang begitu kompetitif. Selain itu, pelbagai analisis dalaman dan luaran telah dilaksanakan

terhadap Maybank, antaranya ialah analisis PESTEL, Lima Gerak Kuasa Porter, dan Analisis

VRIO. Hasil menunjukkan inisiatif-inisiatif yang dilaksanakan oleh Maybank adalah selari

dengan visi dan misi, mempunyai kemenangan segera; mempunyai strategi jangka pendek

dan sederhana, dan strategi jangka panjang. Inisiatif yang dilakukan memberi fokus kepada

sumber manusia di samping strategi syarikat secara menyeluruh. Beberapa komen dan

cadangan telah dikemukakan kepada Maybank agar syarikat ini dapat menjadi lebih baik.

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ABSTRACT

Nowadays, the challenges faced by the banking industry are very huge because most banks

emerged from a period dominated by cost-cutting, downsizing or downscaling. This case

study aims to analyse the external and internal factors of Maybank Berhad by looking at

products and service marketing strategic, and transformation program that had took place in

this company. In line with “Community Financial Services and Global based Banking”

strategic thrusts, numerous transformation strategy successfully implemented, i.e., Insurance

& Takaful, Information Technology Transformation Programme and Quality of Service.

Three of these strategies closely related to staff and customers of Maybank. It is very crucial

for the company to understand customer expectations and perceptions of offered quality. This

is because the perceived level of satisfaction by a customer is a key to maintain customer

loyalty as well as uphold an image of the banking industry as the best industry in the world in

a very competitive environment. In addition, various internal and external analyses were

performed towards Maybank, such as PESTEL analysis, Porter's Five Forces, and VRIO

analysis. The results showed that many initiatives done by Maybank align with the vision and

mission, have quick wins; short and medium-term strategies, and long-term strategies. The

initiatives done focused on the human resources as well as the company strategies as a whole.

Furthermore, several comments and suggestions have been presented to Maybank in order to

ensure how the company can become better.

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TABLE OF CONTENTS

1. INTRODUCTION 1

2. BRIEF HISTORY OF THE MALAYSIA BANKING INDUSTRY 3

2.1 Malayan Banking Berhad’s Humble Beginning 3

2.2 Malayan Banking Berhad Today 4

2.3 Shareholdings 7

2.4 Financials 8

2.5 Group Corporate Structure 9

2.6 Maybank’s Vision 10

2.7 Maybank’s Globalization 11

2.8 Current Initiatives 13

3. COMPETITORS IN THE INDUSTRY 15

3.1 Maybank Compared Against Industry Players 15

3.2 Public Bank Berhad 16

3.3 CIMB Group 16

3.4 RHB Bank Berhad 18

4. INTERNAL ENVIRONMENT 19

4.1 Maybank in Position of Strength 19

4.2 Segmental revenue 23

4.3 Product & Services 24

4.4 VRIO Criteria 26

5. EXTERNAL ENVIRONMENT 28

5.1 PESTEL Analysis 28

5.2 PORTER’s Five Forces 31

6. STRATEGY TO ACHIEVE COMPETITIVE ADVANTAGES 36

7. CONCLUSIONS 39

REFERENCES i

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List of Tables

Table 2.1 Substantial Shareholders as Per The Register of Substantial Shareholders 7

Table 2.2 Maybank’s Group Corporate Structure 9

Table 3.1 Maybank’s Competitors 15

Table 3.2 Maybank’s Competitors in All Key Business Sectors 20

Table 3.3 Maybank’s Market Leadership 22

Table 3.4 Maybank’s Segmental Revenue 23

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List of Figures

Figure 2.1 Maybank Asset 2009 8

Figure 2.2 Maybank’s Vision 10

Figure 2.3 Maybank Group Global Network 12

Figure 2.4 LEAP30 Strategy 13

Figure 2.5 LEAP30 Performance Improvement Programme 14

Figure 5.1 Porter’s Five Forces Model 32

Figure 5.2 Significant Gaps and Performance Culture of Maybank 35

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1. INTRODUCTION

The financial system has over several decades been instrumental in facilitating the

economic success of Malaysia. As Malaysia advances into the new transition to the

new economy – into a more globalised, a more digitized and knowledge based

economy. The financial system is also operating in an era of rapid change, in an

environment that is being shaped by advances in technology, by trends towards

greater market orientation and globalization.

Even to the most casual observer of the financial services industry, the above

statement portrays the challenging times for financial institutions. The rate at which

the industry changes and develops in the complex nature of the financial system is

breathtaking. The rapid pace of the information technology revolution,

globalization, increasing buying sophistication and significant demographic changes

are driving forces behind these changes.

Nowadays the challenges faced by the banking industry are enormous, and as more

challenging because many banks are emerging from a period dominated by cost-

cutting, downsizing or downscaling. In other words: after a prolonged period of

internal focus, banks must again concentrate on external issues, and put strategic

marketing at the top of their agenda. Strategic business marketing (also known as

strategic industrial marketing or strategic business-to-business marketing) is the

strategic marketing of products and/or services for transformation or

‘‘consumption’’ by businesses.

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It is important to understand the customers’ expectation and perception of quality,

an organization may deliver a satisfactory service where satisfaction has long been

regarded as key to customer loyalty and views the banking industry as a mature

industry in nature; whereby, in this highly competitive environment customer

satisfaction is essential for bank’s sustainability. The banking sector has responded

far more slowly than other sectors to the new challenges that sustainability presents.

Bankers generally consider themselves to be in a relatively environmentally friendly

industry (in terms of emissions and pollution). However, given their potential

exposure to risk, they have been surprisingly slow to examine the environmental

performance of their clients.

Malayan Banking Berhad (Maybank) is the leading bank in the Malaysian financial

services industry and has always been regarded as a benchmark of the financial

sector performance. An overview of Maybank and the industry it is operating in,

and presentits global (international) business activities and the situation which

warrants for the alternative actions to be recommended to address any possible

issues that may deter its performance or actions to sustain its current success. The

exercise will at best try to amongst other identify the company’s international

business activities, efforts, and marketing programs at Maybank based on the

available information gathered.

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2. BRIEF HISTORY OF THE MALAYSIAN BANKING INDUSTRY

The banking industry in Malaysia dates back to the early 1900s when rapid

economic development, as a result of thriving profits from rubber plantations and

the tin industry then, saw the opening of foreign bank branches. Mercantile Bank

which later became the subsidiary of the Hong Kong Bank (nowknown as HSBC)

set up an office in Penang followed by Chartered Bank in 1875 and Hong Kong

Bank in 1884 - 1913 saw the setting up of Malaysia’s first domestic bank i.e.

Kwong Yik (Selangor) Banking Corporation. Since then, the banking industry has

continued its steady growth and expansion until eventually there was a need for a

governing body to oversee the activities and operations of the numerous banks in

the country.

2.1 Malayan Banking Berhad’s Humble Beginning

Maybank was born in June 1960 with the clear and simple aim of assisting in

financing new industries under the Government’s development programme and

extending banking facilities to rural areas where none exists. From its inception, the

Bank resolved to have a distinct Malayan image in keeping with the nation’s new

identity. Shareholders and staff reflected a local majority. The Tiger, considered an

indigenous symbol, was adopted as the Bank’s corporate logo.

Malayan Banking Berhad opened its doors for business in downtown Kuala Lumpur

on 12 September 1960. The Bank was then listed on the Kuala Lumpur Stock

Exchange on 17 February 1962.

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By the first anniversary, which fell on 12th Sept 1961, Malayan Banking had a

network of 30 branches. At the end of 1961, the Bank’s 35 branches made up 60%

of the 58 domestic banks. The 112 branches of the 18 foreign banks averaged out to

six branches per bank. The pace of growth of the Bank during the pioneering years

was remarkable. By 1966, Malayan Banking had established 108 branches, which

includes one each in London, Kowloon and Hong Kong.

Between 1966 and 1970 the Bank underwent major changes which involved

restructuring and consolidation. The 60s had been a pioneering period – of setting

up the bank, of rapid branch expansion and consolidation. At the start of the 1970s,

the Bank forged new ties with the Malaysian government, further strengthening its

footing in the country.

In the 1970s, the Bank’s major focus was on the mobilization of savings and the

direction of loans to the manufacturing sector, residential housing and the ‘small’

man – the farmer, fisherman, the small businessman and the man in the street.

2.2 Malayan Banking Berhad Today

Today, Maybank proudly stands above its peers as Malaysia’s flagship financial

services group in a vibrant, strong andhighly competitive banking and financial

services landscape. Total assets of the Group stands at RM310.7 billion andthrough

an extensive network of well-over 1,700 branches and offices in 14 countries

throughout the world. Maybank is represented in the world’s major financial centers

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of London, New York, Hong Kong and Singapore and have correspondent banking

relationships with more than 700 foreign banks throughout the world. Maybank

through its subsidiary Maybank Islamic is the leading Islamic bank in the Asia

Pacific region and among the world’s top 10 Islamic financial institutions. The

Group employs over 39,000 Maybankers to serve over eight million customers.

With close to five decades of growth, Maybank today has clear market leadership

and is among the top three in almost all business sectors. The bank’s extensive

product and service range includes commercial banking, investment banking,

Islamic banking, offshore banking, insurance and takaful, factoring, trustee services,

asset management, stock broking, nominee services, venture capital and Internet

banking.

Maybank operates consumer banking, business and corporate banking, as well as

private banking services, through a network of more than 374 branch offices and

more than 2,700 ATM machines in Malaysia. Maybank’s Consumer Banking

remains one of the Group’s primary contributors with a variety of services and

products including mortgage and automobile financing, credit and debit cards, bank

assurance, wealth management as well as retail and Internet banking. The Corporate

and Business Banking, which comprise corporate and commercial segments, caters

to public listed companies, multinationals and institutional clients as well as SMEs

via a variety of services that include cash management and trade financing.

Its subsidiary, Maybank Islamic, which commenced operations in January 2008

taking full advantage of the Group’s pioneer status in introducing Islamic Banking

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services and has today assets of about RM34.7 billion. Meanwhile the Bank’s

Investment Banking Group spearheaded by Maybank Investment Bank offers a

complete range of investment solutions from corporate finance to debt capital

markets, equity markets to research and strategic advisory.

Beside its commercial banking network, Maybank operates a number of specialized

subsidiaries in the insurance, investment banking and assets management, and

finance sectors.The Group’s Insurance business under the Etiqa brand offers all

types and classes of Life and General conventional insurance as well as Family and

General Takaful plans via a robust agency force of over 21,900 agents

complemented by a wide bank assurance and bank takaful network.

Maybank is recognized for making waves in the banking and financial services

industry locally and internationally. As Malaysia’s banking icon who has made an

impact over its fifty years of existence, the Bank has achieved many milestones,

among them are;

• Largest financial services provider in Malaysia

• No.1 bank in Malaysia by assets and reach

• Largest banking network in Malaysia with 386 branches, 17 trade finance

centers, 39 business centers, 37 share investment centers and 22 private banking

centers

• No.1 Islamic bank in Malaysia by assets

• No.1 Islamic financial services provider in Asia Pacific

• Largest rights issue of RM6 billion in Malaysia

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• First in Malaysia to embark on an Occupational Safety & Health Mentorship

programme with SMEs in 2009

• First to launch online facility for making additional investments in ASB units

with PNB

• Malaysia’s Most Valuable Brand in 2008 & 2007

• First to launch Malaysia’s dual purpose Bankcard in partnership with Visa

International in 2008

• First to launch complete mobile money service in Malaysia with Maxis in 2007

• First to introduce the structured commodity financing solution for business

customers in 2007.

2.3 Shareholdings

Table 2.1: Substantial Shareholders as per the Register of Substantial Shareholders

Source: Maybank Annual Report 2009

The bank has an authorized share capital of 10,000,000,000 with a paid-up share

capital of 7.077.664, 368. The Maybank Annual Report 2009 reported that the three

substantial shareholders for Maybank are Amanah Raya Nominees (Tempatan) Sdn

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Bhd holding 45.9% shares, followed by the Employees Provident Fund Board with

11.95% shareholding and Permodalan Nasional Berhad holding 6.63 %.These three

substantial shareholders collectively hold 64.48% of the shares. With the exception

of the Employee Provident Fund which is a statutory body the other two substantial

shareholders are Government Linked Companies (GLC).

2.4 Financials

Figure 2.1: Maybank Assets 2009

Source: Maybank Annual Report 2009

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Today, Maybank proudly stands above its peers as Malaysia’s flagship financial

services group in a vibrant, strong and highly competitive banking and financial

services landscape. Total assets of the Group stand at RM310.7 billion while total

shareholders’ fund stands at RM 24.8 billion, whereas the total assets for the bank

stands at RM 238.2 billion and total shareholders’ fund stands at RM 22.5 billion

for the financial year ending 30 June 2009.

2.5 Group Corporate Structure

The chart above is the Group Corporate Structure for the main operating business

units and does not include subsidiaries involved as nominees, trustees and

investment holding companies.

Table 2.2: Maybank’s Group Corporate Structure

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Source: Maybank’s Presentation at Invest Malaysia Conference 2009, Kuala

Lumpur, 30 June 2009.

2.6 Maybank’s Vision

Maybank’s vision is to be the leading regional financial services group by 2015. To

achieve this, the Bank will strive to be the top five in South/Southeast Asia by size

and performance, and as a true regional organization it aims to derive 40% of the

gross loans from its international operations.

Figure 2.2: Maybank’s Vision

Source: Maybank’s Presentation at Invest Malaysia Conference 2009, Kuala

Lumpur, 30 June 2009.

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2.7 Maybank’s Globalization

Maybank’s venture into the global arena, which started as early as the 1960s, has

gained momentum over the years with clear presence in high-growth markets and

leadership in the fast-growing Islamic Banking sector.

In the 1990s Maybank’s began its rapid expansion abroad. Labuan International

Offshore Financial Centre was established in October 1990, and in December

Maybank International (Labuan) Limited and Maybank International Trust

(Labuan) were set up at the Labuan Offshore Financial Centre. In line with its

expansion initiatives, the Maybank Phnom Penh branch in Cambodia was officially

opened in December 1993.

Two representative offices were also opened in Beijing, China and Tashkent,

Uzbekistan in the same year. In November 1994, Maybank became the first

Malaysia- Indonesia joint venture bank with the incorporation of P.T May Bank

Nusa International (laternamed to P.T Bank Maybank Nusa International). The

regional network was further enhanced with the setting up of Maybank Hanoi

branch as well as two representative offices in Ho Chi Minh City, Vietnam and

Yangon, Myanmar in 1995.

The company operates 22 branches throughout Singapore providing a full range of

banking and financial products and services. Maybank, through Maybank

Philippines Incorporated, has 45 branches in the Philippines and also has a banking

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presence in most of the other Southeast Asian markets, including Brunei, Papua

New Guinea, Indonesia, Cambodia and Vietnam. The bank also operates branches

in New York, London, Hong Kong and Bahrain. Maybank was the first Malaysian

bank granted the right to establish a branch office in China.

Figure 2.3: Maybank Group Global Network

Source: Maybank Annual Report 2009

Maybank has expanded its international footprint in Indonesia, Pakistan and

Vietnam to complement its presence in Singapore, the Philippines, Brunei

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Darussalam, Cambodia, Papua New Guinea, Hong Kong SAR, People’s Republic

of China, Bahrain, Uzbekistan, the United Kingdom and the United States.

2.8 Current Initiatives

With the challenges in mind, Maybank has adopted best practices that will set the

benchmark for customer care. The foundation of this model is premised on

Maybank Group’s three Ps of People, Products and Processes, which must be well

aligned for the Group to achieve excellence in customer experience. With this the

Bank launched the Group-wide performance improvement programme,

affectionately known as LEAP30, which was initiated in the second half of 2008.

Maybank is confident that with the traction gained so far, and the continued

commitment and strong support of Maybankers, LEAP30 will thrust all sectors

within Maybank towards achieving the Group’s vision to become one of the top five

banks in South and South East Asia by 2015.

Figure 2.4: LEAP30 Strategy

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The LEAP30 Transformation initiatives continue to reinforce a strong service-

oriented culture in the Group based on embracing the Group Core Values to

improve customer retention and increase customer acquisition.

Figure 2.5: LEAP30 Performance Improvement Programme

Source: Maybank Annual Report 2009

As part of its strategic transformation plan the Maybank Group has also taken

proactive steps to strengthen its capital base by undertaking announced a rights

issue of up to RM6.0 billion, which would positioned Maybank as one of the best

capitalized banks in Asia with a proforma risk weighted capital ratio of 16.4%. The

rights issue will support the Group’s aspiration to be among the top 5 banks in

South and South East Asia by size and performance by 2015.

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3. COMPETITORS IN THE INDUSTRY

3.1 Maybank Compared Against Industry Players

The charts below show, as at 31 March 2009 Maybank still maintains the number

one position against the industry players in terms of total assets, net profit, loans

and market capitalization trailed by its strongest competitors i.e. BCHB (CIMB) and

Public Bank.

Table 3.1: Maybank’s Competitors

Source: Maybank’s Presentation at Invest Malaysia Conference 2009, Kuala

Lumpur, 30 June 2009.

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3.2 Public Bank Berhad

Public Bank Berhad is a bank based in Malaysia. Public Bank is currently the

biggest domestic bank in Malaysia by shareholders' funds. It focuses on retail

customers and small to medium sized enterprises. The bank was founded in 1966 by

Teh Hong Piow, the then general manager of Malayan Banking. The bank was

listed on the Malaysian Stock Exchange in 1967.

The Public Bank Group's business ended the financial year 2005 on a high note with

RM111.6 billion in assets, RM68.1 billion in loans and RM84.1 billion in deposits.

In terms of balance sheet size, the Public Bank Group is the third largest banking

group in Malaysia with approximately US$ 41.76 billion in total assets in Malaysia

with the lowest non-performing loan ratios.

Presently, Public Bank has 243 local branches and 3 overseas branches namely,

Hong Kong Branch, Colombo Branch, Sri Lanka and Vientiane Branch, Lao PDR.

3.3 CIMB Group

CIMB Groupis Malaysia’s second largest financial services provider, and fifth

largest in Southeast Asia by total assets. CIMB Bank Berhad is the commercial

banking arm of CIMB Group, offering retail banking services to over 5.3 million

customers in Malaysia. It provides a comprehensive range of consumer banking

products and services through a country-wide network of 367 branches, and over

2100 self-service terminals and internet channels. As the second largest commercial

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bank in Malaysia, CIMB Bank has significant market share across all consumer

banking products.

In Singapore, CIMB Group’s consumer banking business operates on a full banking

license via CIMB Bank Singapore, which offers a full suite of banking products to

high net worth individuals, businesses and retail clients.

CIMB Group’s consumer banking business in Indonesia is offered through its

77.24% owned subsidiary PT Bank CIMB NiagaTbk. Established in 1955, it

merged with PT Bank LippoTbk in November 2008 to form the sixth largest bank

in Indonesia by assets, with over 650 branches nationwide.

Bank CIMB Niaga offers a comprehensive range of conventional and Shariah-

compliant banking products and services. It was the first local bank to introduce

ATM services in 1987 and online banking in 1991. It is currently the second largest

mortgage provider in Indonesia with a 10.9% market share.

In Thailand, CIMB Group controls 93.15% of Bank Thai as of March 2009 and is

its single largest shareholder. Listed on the Stock Exchange of Thailand, Bank Thai

has a solid deposit and lending business and operating base of SME and retail

customers. With subsidiary businesses in stock broking, insurance and asset

management, Bank Thai is the 11th largest commercial bank in Thailand by assets

with 147 branches nationwide.CIMB Group also has commercial banking branches

in Hong Kong and London.

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3.4 RHB Bank Berhad

RHB Bank Berhad is a bank based in Kuala Lumpur, Malaysia. It specializes in

commercial banking, corporate and investment banking and international banking

services. The bank was formed after a merger between Kwong Yik Bank and DCB

Bank (Development and Commercial Bank, also formerly known as D&C Bank),

on July 1, 1997, and Sime Bank and Bank Utama later.

On March 9, 2007, the Employees Provident Fund (EPF) gained control of the

bank, after winning a bid against EON Capital and a Kuwait Finance House-led

consortium. RHB Bank is a part of RHB Capital Berhad financial conglomerate.

RHB Bank was the third largest bank in Malaysia, with 200 offices in Malaysia and

the region (as of 2002). The bank was also named the "Best Domestic Bank" by

both Finance Asia and Euromoney in 1997.

RHB Bank specializes in consumer banking with other entities like RHB Islamic

Bank, Delta Finance to its name. RHB Bank is a commercial bank focusing on

industrial and commercial lending in Singapore, despite it being a fully qualified

bank.

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4. INTERNAL ENVIRONMENT

4.1 Maybank in a Position of Strength

Maybank has positioned itself as the largest banking group in Malaysia with a total

asset of RM 309 billion as at 31 March 2009 and market capitalization of RM 41.05

billion as at 26 June 2009, surpassing its competitors, namely CIMB (BCHB),

Public Bank, RHB Capital, AMMB, Hong Leong Bank, Affin Bank, Alliance Bank

and EON Capital.

As shown in the table below Maybank is still among the top 3 in almost all key

business sectors.

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Table 3.2: Maybank’s Competitors in All Key Business

Sectors

Source: Maybank’s Presentation at Invest Malaysia Conference 2009, Kuala

Lumpur, 30 June 2009.

However competitors are following Maybank very closely with BCHB in second

place in terms of total assets of RM 227 billion as well as RM 32.6 billion in terms

of market capitalization. Public Bank in a closing in at third position, with total

assets of RM 199 billion and market capitalization of RM 31.43 billion ( Maybank

Annual Report 2009).

It is lagging behind in terms of consumer loans and auto loans controlling 16% of

market share, housing loan with 14%, corporate loans and Islamic deposits with

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17%, debt issuance with 21% and asset management with 9% as compared to other

industry players.

“Banks should have the micro data on hand to ensure they really be customer-

focused” (Assistant of CFO).

Maybank realized that as the market leader it is facing serious challenges to

maintain its number one position in the highly competitive banking industry. The

competitors are trailing Maybank closely and have intensified their competition, this

coupled with other factors such as the macroeconomic pressure, demanding

customers and significant gaps in its execution capabilities and performance culture

resulting a less than impressive performance and Maybank is losing market share to

aggressive competitor who are ever ready to pounce at Maybank’s leadership.

It was observed that both BCHB and Public Bank are rapidly catching up with

Maybank and the possibility of them overtaking the leadership position from

Maybank. Under the circumstances Maybank embarked on a strategic

transformation journey to safeguard and maintain its leadership as well to retain

and regain its market share.

The table below illustrates further on the threat Maybank is facing in its market

leadership.

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Table 3.3: Maybank’s Market Leadership

Source: Aseambankers Equity Report on Maybank’s 5 – Year Performance.

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4.2 Segmental Revenue

Table 3.4: Maybank’s Segmental Revenue

Source: Maybank Annual Report 2009

Maybank remained focused on its goal to become a leading regional financial

services group by 2015 and further expanded its presence in 13 overseas markets.

For the financial year 2009, the International sector managed to contribute 9.6% to

the Group’s profit before tax. The Group’s Singapore operations, maintained its

growth momentum by recording an increase of 12% in profit before tax and

contributed approximately 88% of profit before tax to the International sector for

the financial year 2009 ( Maybank Annual Report 2009).

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Maybank Singapore is also the Group’s largest overseas unit in terms of assets.

Maybank Singapore contributes approximately 60% to the Group’s total

international loan portfolio. The Singapore branch is the first in Singapore’s

banking industry to have 1achieved triple certification for business excellence

(Maybank Annual Report 2009).: Singapore Quality Class (SQC), Service Class

(SC) and People Developer (PD).

4.3 Product & Services

Maybank Group offers an extensive product and service range which includes

commercial banking, investment banking, Islamic banking, offshore banking,

insurance and takaful, factoring, trustee services, asset management, stock broking,

nominee services, venture capital and internet banking.

Maybank's main business operations are in Consumer Banking, Business Banking

and Corporate Banking, Global Markets and International Business. Maybank

Investment Bank is the Group's investment banking division while the Insurance

business is operated under the Etiqa brand.

Commercial banking is the main business of the Maybank Group with Consumer

Banking as one of the Group’s primary contributors which had a variety of services

and products including mortgage and automobile financing, credit and debit cards,

bancassurance, wealth management as well as retail and Internet banking.

1 Key announcements see www.maybank.com

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Corporate and Business Banking, which comprise corporate and commercial

segments, caters to public listed companies, multinationals and institutional clients

as well as SMEs via a variety of services that include cash management and trade

financing.

Business Banking sector facilitates Malaysian businesses in becoming domestic and

regional champions. The sector currently comprises two distinct segments, namely

Small & Medium Enterprises (SME) representing and Commercial.

Corporate Banking serves as a one-stop financial solutions provider for Government

Linked Companies, public-listed Malaysian companies and multinational

corporations. Its product offering caters to both the local and regional needs of

customers.

. Maybank2u.com is Maybank’s online financial

portal and is the No.1 Internet banking website in Malaysia with 3.8 million

registered users anda leading market share of over 54%.

. Maybank Islamic is Maybank

Group's wholly-owned, full-fledged licensed Islamic bank Maybank Islamic is

currently the largest provider of Islamic financial services in the Asia Pacific region

and ranked 10th among the world’s Islamic financial institutions in terms of

Shariah-compliant assets.

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. The Investment Banking Group spearheaded

by Maybank Investment Bank offers a complete range of investment solutions

from corporate finance to debt capital markets, equity markets to research and

strategic advisory.

Etiqa is the brand for Maybank Group’s Insurance business

which offers all types and classes of Life and General conventional insurance as

well as Family and General Takaful plans via a robust agency force of over 21,900

agents complemented by a wide bancassurance and bancatakaful network.

4.4 VRIO Criteria

VRIO is an acronym for valuable, rare, inimitable, and organization. The VRIO

framework is the foundation for internal analysis, resource-based analysis, of the

firmdetermines which resources and capabilities result in which strengths or

weaknesses and get to the heart of why some resources help firms more than

others. Maybank perspective, their performance relative to industry peers is likely to

vary according to the level to which resources, capabilities, and ultimately core

competencies satisfy VRIO criteria. The four criteria are explored as follows;

Valuable. A resource or capability is said to be valuable if it allows the firm

to exploit opportunities or negate threats in the environment. Maybank

perspective, being the first mover in the internet or online banking, gave

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Maybank valuable advantage to attract large number of subscribers to the

service. The technical expertise on internet or online banking facilitate

Maybank to reach wide clienteles, particularly white color clients who prefer

to conduct “desk banking” than the traditional method. Maybank’s wide

networks, both local and also global reach, made it convenient for its clients

to conduct businesses and transactions across nations. Strong financial

resources coupled with GLC status gave Maybank added advantage to tap

deposits from government and government related agencies. On the other

hand, Maybank’s control of the Islamic banking services gives it a

significant advantage in many markets, both regional and globalexpansion.

The abundant resources supported by experienced and strong workforce are

valuable assets that drive Maybank to where it is now.

Rare. A resource is rare simply if it is not widely possessed by other

competitors. Maybank perspective, widely known and well recognized by its

unique brand name and a tiger head logo. Maybank’s subsidiaries and

related companies are closely associated by the same brand name and logo

making it easily recognized as a group.

Inimitable. An inimitable resource is difficult to create ready substitute for.

This is probably the toughest criterion to examine because given enough

time and money almost any resource can be imitated. Maybank perspective,

its strong financial resources and wide network, across the globe, is a

difficult act for others to catch up. Maybank is banking on its expertise in

28

Islamic banking to expand the service across Asian region and other Muslim

countries.

Organized. The firm must likewise have the organizational capability to

exploit the resources. Being government – linked company, Maybank enjoys

some advantage in term of government deposits and other credit portfolios.

Within its stable, Maybank is a model of being one stop financial center –

providing full range of financial services. In term of control and regulatory

framework, Maybank has set a standard for others to benchmark against.

5. EXTERNAL ENVIRONMENT

5.1 PESTEL Analysis

Rapid economic development or the economic pitfalls in certain countries may

provide opportunity or threatto the corporations. This means the trends in the

economic part of the societal environment can have an obvious impact on business

activity. Other forces such as political forces, technological forces, sociocultural

forces etc. may also provide direct and indirect impact to the corporations.

Therefore, aPESTEL forces model is a technique that can be used toscan the

societal environment of Maybank.

Political

What is happening politically in the environment in which Maybank operates,

including areas such as tax policy, employment laws, environmental regulations,

trade restrictions and reform, tariffs and political stability. Typically Maybank is

29

headquartered in Malaysia, a country which is politically stable. The Bank is a

Government Linked Company (GLC) and is backed by the country’s biggest

fund management company as the single largest shareholder as well as by the

country’s Employee Provident Fund. As a GLC the Bank enjoys the privilege

from Government policies which has contributed to the Bank’s stature as it is

today.

Economic

What is happening within the economy, for example; economic growth/ decline,

interest rates, exchange rates and inflation rate, wage rates, minimum wage,

working hours, unemployment (local and national), credit availability, cost of

living, etc. The current state of the economy is working in favor of Maybank,

the BNM’s revision of the overnight policy rate indirectly improves the Bank’s

liquidity enabling it to expand loan portfolio and extending credit to potential

customers which would enlarge its customer base. The improving economy

creates business opportunities which would drive the demand for banking

facilities and services and provides opportunities for the Bank to grow.

Social

What is occurring socially in the markets in which the Bank operate or expect to

operate, cultural norms and expectations, health consciousness, population

growth rate, age distribution, career attitudes, emphasis on safety, global

warming. The Malaysian society has grown to a society that has a high rate of

computer literacy. There is demand for internet banking which provides the

convenience of banking and complements the customers’ lifestyle. Maybank

30

through it debit and credit cards and its wide array of merchants helps improve

the living convenience through cashless transactions where most would carry

plastics cards versus cold hard cash. There is also the opportunity into Islamic

Banking system which promotes profit sharing and has been gaining

considerable popularity among the Muslims and non Muslim.

Technological

What is happening technology-wise which can impact what the Bank do,

technology is leaping every two years, how will this impact the products or

services. New technologies are continually being developed and the rate of

change itself is increasing. There are also changes to barriers to entry in given

markets, and changes to financial decisions like outsourcing and insourcing.

Maybank is improving its competitive advantage through the outsourcing of its

non-core business, through this initiative the Bank would be able to concentrate

more on what does best and optimize its resources to maximize its profits. It is

also investing in the latest technology and has been the market leader in terms of

the technology used to provide the best service to its customers.

Ecological

This factor happens with respect to ecological and environmental aspects. Many

of these factors will be economic or social in nature. Maybank, being wary of

the environment and the increasing awareness on ecological factors saw the

opportunity in Green Banking where it responds to BNM’s call to provide a

special fund specifically to customers investing in green technology.

31

Legal

What is happening with changes to legislation. This may impact employment,

access to materials, quotas, resources, imports/ exports, taxation etc. The legal

environment has a direct impact on Maybank. Government’s move towards

liberalizing the financial industry has open doors to global players in the

Malaysian scene. This prompted Maybank to venture beyond the Malaysian

shores as part of its expansion. The introduction of new laws such as the Anti

Competition Law 2010, the Whistleblower Protection Act 2010 and the Personal

Data Protection Act 2010, have a direct impact on the Bank requiring it to revise

its processes and procedures to ensure that it is operating within the country’s

regulations.

5.2 PORTER’s Five Forces

"Porter's five forces" is a framework for the industry analysis and business strategy

development developed by Michael E. Porter of Harvard Business School in 1979.

It uses concepts developing Industrial Organization (IO) economics to derive five

forces that determine the competitive intensity and therefore attractiveness of a

market. Three of Porter's five forces refer to competition from external sources. The

remainders are internal threats. Porter referred to these forces as the micro

environment, to contrast it with the more general term macro environment. They

consist of those forces close to a company that affect its ability to serve its

customers and make a profit. Porter's five forces include three forces from

'horizontal' competition: threat of substitute products, the threat of established

32

rivals, and the threat of new entrants; and two forces from 'vertical' competition: the

bargaining power of suppliers and the bargaining power of customers.

Figure 5.1: Porter’s Five Forces Model

A Graphical Representation of Porter's Five Forces

Based on Porter’s Five Forces Model, Maybank has to deal with more competitive

situation from other banks. At the same, with the liberalization, Maybank has to

face more competitors from International Banks such as UBS, BNP, Al-Rajhi,

Standard Chartered, Hong Leong and etc. Based on the current situation, with the

Strategic Transformation Plan, Maybank has already embarked and creating a

strong footing in other countries such as Singapore, Indonesia, etc. with more

focused in core business activities and segmentation of the products and services in

order to cater a more diversification in the industry.

If we take a look from the perspective “Threats of New Entrants” force, Maybank

has a lot of advantages in order to counter attack the new players in the market. For

instance, Maybank has a strong brand building among Malaysian for the past 50

33

years. It has patents and rights for the products and services such as Maybank2u. In

term of cost advantage, Maybank has already put in their strategic transformation

plan as main initiatives in order to maintain or creating competitive advantages

among other players in the market. At the same time, Maybank from time to time

has improvised its distribution chain from end to end processes and make it

centralized with other products and services in Maybank. For new players that want

to compete with Maybank, obviously they have to make sure that they need huge

capital requirement which at this stage, it has already become one main source of

competitive advantage to Maybank Group.

In Porter’s model, substitute product refers to products in other industries. To the

economist, a “threat of substitutes” exists when a product’s demand is affected by

the price change of a substitute product. A product’s price elasticity is affected by

substitute products – as more substitutes become available, the demand becomes

more elastic since customers have more alternatives. A close substitute product

constrains the ability of firms in an industry to raise prices. For example in the case

of Maybank, all the products and services are quite similar with other products and

services being offered by other competitors such as loans, savings etc. Therefore,

Maybank needs to do a thorough analysis before creating new products or services

especially in term of charges and pricing. It is because customers nowadays become

more sensitive towards price movements and have a lot of choices being offered by

other banks in Malaysia.

34

“The Bargaining Power of Customers” is the impact that the customers have on a

producing industry. In general, when buyer power is strong, the relationship to the

producing industry is near to what an economists terms as monopsony – a market

in which there are many suppliers and one buyer. Under such market conditions, the

buyer sets the price. In case of Maybank, customers bargaining power is likely to be

high which they have a lot of choices for banking services and at the same time are

price-sensitive. Customers can do a comparative study between banks in Malaysia

and choose the cheapest charges being imposed. However, there are also segments

where customers do not care about the charges being imposed but give more

attention towards convenience level that Maybank may provide which outstanding

than other banks.

Lastly, for the “Bargaining Power of Suppliers”, a producing industry requires raw

materials – labor, components and other supplies. This requirement leads to buyer-

supplier relationships between the industries and the firms that provide the raw

materials used to create products. Suppliers, if powerful, can exert an influence on

the producing industry, such as selling raw materials at a high price to capture some

of the industry’s profits. In case of Maybank, the suppliers bargaining power is

likely to be very low due to the situation whereby Maybank has provide

comprehensive and everything from end to end. Maybank is not solely depending

from other parties externally. For example, in Strategic Transformation Plan, in

term of resources and capabilities, Maybank will create and provide those elements

in order to achieve a distinctive capabilities and competitive advantages among

other competitors. In addition, Maybank also act as one stop financial center where

35

customers can get all the financial services at their convenience level and hence not

depending to other players or suppliers to make it materialize.

Figure 5.2: Significant Gaps and Performance Culture of Maybank

For Maybank, following the disappointing result from the financial year 07/08, it is

facing serious challenges from the competitors threatening its market leadership

with other banks especially its close competitors CIMB Bank and Public Bank

quickly gaining momentum to capture the number one position, macroeconomic

pressure with the liberalization of the financial industry where new entrants

comprising of global players entering the market where the product differentiation

is low, gaps in its execution capabilities and performance culture where the

turnaround time is not impressive and more demanding customers who have choices

of banking with other banks be it local or foreign banks. All these are factors are

significant and have the potential to drive down the overall profitability.

Maybank’s FY 07/08

results disappointing:

-Key financial

performance ratios have

weekend

-Expenses are growing

faster than income

Intensifying

competition

threaten our

market leadership

Macro-

economic

pressure

More

demanding

customer Significant gap

and performance

culture

36

As Malaysia’s financial services sector becomes more developed and liberalised,

the rates of return have generally begun to moderate compared to the past decades

of high growth. In addition, Maybank’s dominant size in the Malaysian banking

industry presents a challenge in sustaining its previous growth rate in the domestic

market. It is with the view of sustaining a high growth rate into the future that

Maybank embarked on its mission to seek out higher growth opportunities beyond

its home base. The vision of becoming a regional financial services group by 2015

will in essence enable the Bank to enhance and diversify Maybank Group’s sources

of income stream and thus provide a better return on investment to its shareholders.

6. STRATEGY TO ACHIEVE COMPETITIVE ADVANTAGES

Maybank’s vision among others is to be the top five in South/Southeast Asia by size

and performance and to also be a truly regional organization with 40% of gross

loans derived from international operations. This regional can be viewed as a

medium term initiatives when Maybank is to achieve its vision by 2015.

In realizing the vision by 2015 Maybank has expand its footing in the region via its

acquisition of a 15% stake in ABBank to springboard and grow its consumer

franchisein Vietnam in early 2008. This was followed by the acquisition of Sorak

Financial Holdings, which paved the way for Maybank to be the controlling

shareholder of Bank Internasional Indonesia (BII) a strategic move for it to

accelerate our efforts to penetrate the fast growing consumer market in Indonesia

more aggressively.

37

It is recommended that Maybank expand further to other developing economies in

the region as well as the Middle East. Maybank should consider applying its

successful Islamic Banking Model for application to its branches overseas.

Another possibilities that Maybank might want to consider in boosting its

international competitiveness is by increasing its control of banks abroad, similar to

its acquisition exercise of Bank Internasional Indonesia, MCB Bank Pakistan and

An BinhBank , Vietnam.

Maybank is operating in the ‘‘needs-driven era’’, which is marked by an often flat

primary demand, rising customer sophistication, cut-throat competition, an

explosive growth in the amount of information available and used, and an

increasing number of strategic alliances and acquisitions, some of them across

borders.

The essence of strategic business marketing in this environment today consists of

creatingand developing new (often global) markets and/or businesses, sometimes

with strategicpartners. The main components of this process include:

identifying unfulfilled customer needs;

being proactive in pricing and product development strategies; and

managing (strategic) information efficiently and effectively (Jagersma, 2006).

“To retain the customers is less experience then to acquire the new ones. It is

because you here to do a lot of marketing’s and promotions” (CFO, Maybank).

38

Within national markets, the rules on how capital is raised and placed with investors

are being liberalized, moving closer to the intensively competitive situations which

characterize the unregulated Euro-markets. The boundaries between national

markets are crumbling as governments relax exchange controls, abolish

discriminatory taxes and take a more relaxed view of the entry of foreign banks.

Everywhere, the regulator framework has been left looking outdated and ill-

equipped as financial services are driven more by the demands of shareholders and

customers, and less by the dictates of public policy. The deregulation of financial

markets has proceeded at a quickening but uneven pace across industry and

geographic areas. This uneven spread of deregulation has created temporary

competitive advantages for some financial institutions, but the same institutions

may be forced to drop lines of business or abandon markets in which they do not

have real competitive advantage once their privileged position is gone. The net

result has been a steady erosion of the barriers that once divided financial service

providers into several discrete segments. The resulting opportunities for expansion

fall into three broad categories: new products, new geographic markets, and new

customer groups. The marketing challenge lies in selecting only those routes for

expansion that best fit the capabilities of the individual firm relative to the

competition that it can expect to face.

In this regard, on the long term i.e. beyond 2015, Maybank may want to consider

exploring and taking the advantages of globalization via embarking into an

International Strategies. Maybank may also introduce its Islamic Banking Model to

new market internationally i.e. beyond the Asean region.

39

Internalization may be achieved through forming strategic alliances with world

renowned banks such as HSBC, JP Morgan Chase, and Citibank etc. These alliances

would provide Maybank a passage to penetrate into a new market via leveraging on

the strategic partners brand name before embarking on its own.

Another option to penetrate into the international market would be to apply the

similar strategy when it made its entrance into Vietnam and Pakistan, which is to

acquire equity holding in local banks overseas.

The internalization of Maybank would enlarge its customer base, strengthen its

position and reduce its dependency on the saturated local Malaysian financial

industry as well as its reliance on the strength it currently posses as a GLC.

7. CONCLUSIONS

The highly competitive environment of the banking industry is a mature industry

and in Malaysia’s case the situation has become challenging with financial market

liberalizations with international players setting up their operations here.

The macroeconomic situations with the economic slowdown that hit globally,

changing in borrowing patterns, low interest rate margins and profits are

aggressively being pinched by competitors has resulted the Maybank Group losing

some of its market share to the competitors. To continue being a leader in the

industry Maybank Group has embarked towards a strategic transformation journey

to retain its position and it involves a total transformation where the firm is

40

changing the organizational culture towards customer-centric via adopting to the

relationship marketing approach. 2

To retain its customers and, be it internally or externally, the banking group is

looking at building long-term relationship, creativity and competitive advantages

within the organization via the launch of the LEAP 30 program. Although changes

do take time the change is taking place. The banking group has initiate

communication programs to channel the bank’s shared value and aspirations to its

employees. The aim is at a common value and culture where all employees will

have the same vision towards achieving the organizational goals

Maybank strive to adhere to a genuine customer orientation philosophy which

would enable it to retain its customers as well as regain market share by gaining the

customers loyalty and commitment. The adoption of the strategic marketing

approach is to improve efficiency, productivity, enhance good cross-selling services

and ultimately will strive towards excellent customer service. For a local bank in an

industry where the market is highly competitive with aggressive competitor the

bank need to retain its customers and gain their trust and commitment to ensure the

bank’s ability to continuously survive and regain its market share, hence a right

approach in building the long term relationship is crucial.

2 Development has taken place since the completion of the case study

i

REFERENCES:

Aseambankers Equity Report on Maybank’s 5 – Year Performance

Association of Banks in Malaysia. Available at http://www.abm.org.my

CIMB. Available at http://en.wikipedia.org/wiki/CIMB

Financial Sector Masterplan, 2001, Bank Negara Malaysia, Kuala Lumpur

Porter, M.E., (2008)"The Five Competitive Forces that Shape Strategy", Harvard Business

Review, January.

Public Bank Berhad. Available at http://en.wikipedia.org/wiki/Public_Bank

RHB Bank. Available at http://en.wikipedia.org/wiki/RHB_Bank

Government Linked Corporation. Available at http://www.answers.com/topic/government-

corporation

Maybank Annual Report 2009&2010, Malayan Banking Berhad, Kuala Lumpur

Maybank’s Presentation at Invest Malaysia Conference, 2009, Malayan Banking Berhad, Kuala

Lumpur.

Khairussalleh, (2011, May 3). (Personal interview with CFO). Menara Maybank, Malaysia.

Khairussalleh, (2012, Feb 20). (Personal interview with CFO). Menara Maybank, Malaysia.

1

TEACHING NOTES

STRATEGIC CHANGE AND TRANSFORMATION:

A CASE STUDY AT MALAYAN BANKING BERHAD (MAYBANK)

By

Assoc. Prof. Dr.Hartini Ahmad

Assoc. Prof. Dr.Shahimi Mohtar

Dr.Darwina Ahmad Arshad

Azrain Nasyrah Mustapa

Synopsis

This case is about strategic change and transformation in a case study at Malayan Banking

Berhad (MAYBANK). Nowadays the challenges faced by the banking are enormous.The bank is

in more challenging since many banks are emerging from a period dominated by cost-cutting,

downsizing or delayering. In other words: after a prolonged period of internal focus, banks must

again concentrate on external issues, and put strategic marketing at the top of their agenda.

Strategic business marketing (also known as strategic industrial marketing or strategic business-

to-business marketing) is the strategic marketing of product and/or services for transformation or

“consumption” by business.

2

Learning Outcomes

This integrated case study aims

1. To examine the business strategy of a chosen company

2. To identify the possible critical problem and dilemma of a company

3. To identify conflict that may be faced by a company

4. To suggest and recommend the probable solutions or alternative actions

5. To address the issues that may deter the organization performance or to sustain from its

current success.

Case Leading Strategy

1. The students should be familiar in the Malaysian financial services especially in Malayan

Banking Berhad (MAYBANK).

2. The class will be divided into groups of four to discuss the case

3. The class discussion should be over two lecture sessions of at least 90 minutes duration

4. The first lecture

a. 10 minutes – The case brief by the facilitator

b. 15 minutes – Individual reading (this can be done without if the case is given ahead of

the class)

c. 20 minutes – Group discussion

d. 30 minutes – Class discussion raising issues and strategies for knowledge search

e. 15 minutes – Summary and critique by facilitator

5. Research – 1 week for research external to the classroom and preparation for presentation

6. The second lecture

3

Role play – two groups present questions 3 and 4 respectively and the other two groups

act as the Board of Directors.

a. The presenters need to show that they have done their homework and justified their

recommendations properly.

b. The Board of Directors needs to show that they understand what their responsibilities

and act in the best interest of the stakeholders.

Suggested Questions

1. Identify the issues faced by Maybank.

2. Identify new strategy implemented by Maybank.

3. What are your recommendations to manage personnel for Maybank Change Management

particularly using the LEAP 30?

4. How important is leadership atMaybank? Could you recommend how Maybank can be

better?

4

Issues, Analysis and Actions

Issues Decision Making

Tools/Actions

Solution Keys

Understanding the customers’

expectation and perception

Issues concerning the

recruitment and human

resources

Performance Management

Maintain

Leadership

Benchmark for customer

care

Fulfilling customers’ needs

and satisfaction

Structured and holistic

framework

Talent management

Various

managementaccounting

techniques

Situational approach

Launched the group-wide

performance improvement

program, affectionately known

as LEAP30

Customer relationship

management

CRM system

LEAP 30

Strategic human resource

Transparent structure and

governance

Strategic transformation leader

Become a talent and execution-

focused company

Reports may include the following analysis

1. VRIO Analysis

To discuss the main capabilities of Maybank Group.

To identify a core competence of Maybank Group.

2. SWOT analysis

Business description – A detailed description of the company’s operations and business

divisions.

Corporate strategy – Analyst’s summarization of the company’s business strategy.

Company history – Progression of key events associated with the company.

SWOT Analysis – A detailed analysis of the company’s strengths, weaknesses,

opportunities and threats.

5

A propose of SWOT Analysis of Maybank Group as below.

A scan of the internal and external environment is an important part of the strategic

planning process. Environmental factors internal to the firm usually can be classified as

strengths (S) or weaknesses (W), and those external to the firm can be classified as

opportunities (O) or threats (T). Such an analysis of the strategic environment is referred

to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching Maybank’s

resources and capabilities to the competitive environment in which it operates. As such, it

is instrumental in strategy formulation and selection. The following diagram shows

SWOT Analysis for Maybank.

6

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

Financial

stability

Recognized

brand name

Industry leader

Government

Linked

Company

Supported by

government

policy

Industry

experience

Technical

capabilities

Strong

workforce

Abundant

resource

Homogenized

product

Firm size

Poor turnaround

time

Low perceived

quality

Lackadaisical

attitude towards

competition

Weak marketing

initiative

Globalization

Niche market

Liberalization of

industry

New entrants

Change in

political scenario

Change in

government

policies

Competitive

pressure

Despite the strength and opportunities there are significant weaknesses and threats which

Maybank need to give attention especially to its vision to be the leading regional financial

services group by 2015.

7

Strengths

Financial stability – The country's largest banking group Malayan Banking Bhd

(Maybank) has projected a 27 per cent increase in its trade finance business this year

as the economy grows and more customers go online to do transactions.

Recognized brand name - Maybank is mostly a commercial banking franchise, which

positions it as an Economic recovery play, especially in consumer and business loans.

Industry leader - It tops the deposit market with 22% share, with an inherent domestic

deposit franchise advantage. It is expected Maybank’s loan portfolio to grow at 12-

15% over FY10-12F compared to industry average of 8-9%, leveraging on its

domestic franchise for consumer products, especially hire purchase and mortgages,

and Indonesia prospects. Current Maybank is the largest banking service provider in

Malaysia with their ATM machines widely available all over in Malaysia.

Government Linked Company – Maybank is one of the G-20 (20 GLCs).

Supported by government policy - In the sixth year of implementation of the

transformation plan with marked improvements across the board in its business and

stakeholder delivery capabilities, GLCs are primed to catalyze government’s efforts

at structural transformation of the economy under the New Economic Model.

Industry experience – It is a well known bank where it have over 450 office in 14

countries, Maybank is ranked 153 among the world’s top 1000 banks, have 374

domestic branch and 90 international branch.

Technical capabilities – Correspondent banking relationship with 700 foreign banks

throughout the world. It also has diversity in product where they provide opening

account, giving loan, credit cards, investment & insurance and Islamic banking.

8

Strong workforce and Abundant resource – Strong performance where it was listed

second largest in Malaysia Stock Exchange and Bursa Malaysia and Maybank

workforce come from a multifaceted background of skills, disciplines, experience and

industry knowledge to create talented teams of idea generators. Their workforce is a

diverse one to ensure deep appreciation of the intricacies and complexities of each

client’s industry and business.

Weaknesses

Homogenized product – Having a similar products with other banks.

Firm size - Maybank’s operating expenses are expected to remain high over the next

2-3 years. Maybank’s cost to-income ratio projection is 52% over the next three

years. Under normalized conditions, Maybank’s cost-to income ratio should be below

45%.

Low perceived quality – Inefficient service and poor customer service, for example

Maybank does not have bank systems be automated with built in security features to

verify their customer’s accounts and details without having to rely on a piece of

physical paper with a signature.

Poor turnaround time - This would make customer harder to replace card or change

account if go to different branch.

Lackadaisical attitude towards competition and Weak marketing initiative - Maybank

is not even up to scratch on their services to their customers.

Opportunities

Globalization – Maybank has many other investments from other companies and

expand its operations in Vietnam, China, Philippines and India

9

Niche market – (Islamic banking, Islamic asset management, Consumer Banking,

Islamic Debt Issuance) – Growth of existing market where Maybank is experts in the

industry and shares their experience with the employee so by then can expand further

in the industry.

Threats

Liberalization of industry – Economic slowdown like right now where stalling

economies are bad for the banking sector as it impedes loans growth which is the

sector’s bread and butter (borrowers became cautious) and it stirs up bad loans (due to

the burden of rising borrowing cost) which in turn erodes a bank’s financial comfort).

The job is made harder by a brutally competitive landscape with the liberalization of

the industry.

New entrants – Competition to other bank like HSBC and how it has grown from

Hong Kong and Shanghai Banking Corp in the past to becoming a truly global bank

today. They were even been bold enough to venture into Islamic Banking and created

HSBC Amanah at a time when most banks, especially foreign ones, were figuring out

what Islamic Banking was all about and were skeptical. Other bank that has rise up to

challenge Maybank is HongLeong Bank, Public Bank, CIMB Bank and AmBank that

very near edge to Maybank especially in domestic banking.

Change in political scenario or Change in government policies – As one of GLC

companies, changes of the government will have a significant impact to Maybank.

Competitive pressure – With the new entrance from Global bank and liberalization of

industry and also the improvement of local and existing banks have increased a

competitive pressure to Maybank.

10

3. Financial Analysis

Provides a system for planning as well as analyzing financial institution performance.

Continue or discontinue its main operation or part of its business;

Issue stocks or negotiate for a bank loan to increase its working capital;

Make decisions regarding investing or lending capital;

4. Porter’s Five Forces Analysis

To assist on conducting a strategic analysis entails all the five forces to intensity of

rivalry of the company

To understanding risks associated with competitive rivalry of the competing companies

Use Porter’s Five Forces Model to analyze the financial service industry. Given this

analysis, please identify whether the industry attractive or unattractive (low, medium,

high).

The figure below outlines the development of the Porter’s Five Forces Model Maybank

Group in the financial service industry.

11

5. PESTEL Analysis

To help analyze a company and audit environmental influences -Political, Economic,

Sociological, Technological, Environmental, and Legal

To determine what sort of strategies the company should undertake

To help make decisions and to plan for future events

HIGH

Patents, Rights

Brand Building

Absolute Cost Advantage

Strong Distribution Chain

Capital Requirements

HIGH

CIMB Bank, Public Bank, RHB Bank, etc

Growing International Banking Industry

Diversity in the Industry

HIGH

Substitutes

Price Sensitivity

LOW

Lower Dependency on

Suppliers

HIGH

Relative Cost Performance: Buyer

Tendency to Substitute

THREAT OF NEW ENTRANTS

COMPETITIVE RIVALRY

BARGAINING POWER OF SUPPLIERS BARGAINING POWER OF CUSTOMERS

THREAT OF SUBSTITUTE PRODUCTS

i

REFERENCES:

Saunders, Anthony. “Management of Financial Institutions”, Third Edition, McGraw Hill,

2000.

Jagersma, P.K. (2006), “Strategic marketing and the global banking industry: elements of

excellence”, Journal of Business Strategy, Vol. 27 No.4, pp. 50-59.

Jeucken, M. (2001), “Sustainable Finance and Banking”, www.sustainability-in-finance.com

Little, E. and Marandi, E., (2003), “Relationship Marketing Management”, Thomson, Bedford,

London.

Porter, M.E., (2008), "The Five Competitive Forces that Shape Strategy", Harvard Business

Review, January.

Turnbull, P.W. and Moustakatos,T., (1996), "Marketing and investment banking I: Practical and

theoretical challenges", International Journal of Bank Marketing,Vol.14 No.2, pp. 26–37